Houston executive speaks for energy industry

by Houston ChronicleMidland Reporter-Telegram

Published 7:00 pm, Saturday, March 27, 2010

By Brett Clanton

Houston Chronicle

Becoming chairman of the Independent Petroleum Association of America, a Washington lobby representing more than 5,000 U.S. oil and gas producers, would be a big job at any time. Right now, however, it's huge. As producers exult in recent shale gas discoveries that could extend U.S. natural gas supplies for decades, they are facing policy and environmental challenges that could slow their momentum and cost jobs and investment, said Bruce Vincent, IPAA chairman since November and president of Houston-based Swift Energy Co. One meeting at a time, Vincent is focusing on giving policymakers a better understanding of the facts and what he calls the unintended consequences of certain policy moves. Vincent spoke with Chronicle reporter Brett Clanton about the struggle to win hearts and minds, as well as what may be ahead for independent oil and gas producers. Edited excerpts of that conversation:

Q: More than one industry group represents oil and gas producers in Washington, and you're not all on the same page. How has the lack of a unified voice in Washington hurt your industry?

A: I think it's true there are a number of associations that represent some of the different segments of our business, and there have been times in the past where we haven't necessarily spoken with a common voice. There are more issues today coming at us as threats than there have been in decades, whether it's on the tax side or the regulatory side. Even in financial reform we see it. Also with regard to future markets. So, I think there's a much greater effort on the part of these different groups to speak with a common voice.

Q: Under the Obama administration's 2011 budget proposal, your group estimates there will be nearly $40 billion in tax increases on oil and natural gas production over a 10-year period and predicts a long-term reduction in energy output. Not all the budget is likely to pass, but what is your industry bracing for?

A: We're bracing for all of it. And it does kind of take you aback. In a time like this, when we have record deficits, we've got an economy on its heels, we've got the highest unemployment we've seen in a long time and the oil and gas industry is one of the few industries that can actually create jobs. They can create permanent jobs, they can create high-paying jobs and have done so. It's astonishing that we would try to come forward to that industry and increase its taxes, take cash flow away from it, reduce investment in oil and gas resources in America and, more importantly, costing jobs across America because of that reduction in capital investment. What we're trying to do is not just fight them, but go to Washington to educate members of Congress, educate members of the administration, so that they understand the unintended consequences of their actions.

Q: Some would cringe at the idea of industry "educating" lawmakers. How difficult is it to make your points knowing there are some who believe the industry's chief goals with lobbying are to increase access for drilling and protecting profits?

A: I think you just do it in a rational, sound and logical basis, and leave the emotion out of it. The facts will support it. And we're very fact-based. What we've found, if you can get access, and if the people give the attention, they're smart people, and they want to make good decisions for the people of America. But when they understand the impact of some of their policy decisions, such as increasing taxes, while it may sound good that we're increasing revenue for the Treasury, the actual impact of that over time actually costs the Treasury money.

Q: IPAA says a clear majority of Americans support increasing access to more homegrown energy reserves, especially offshore. That was surely true when gasoline was $4 a gallon in 2008, but what about today?

A: I don't have a very recent statistic from a survey, but the public very much supports access to federal lands, particularly offshore. The studies that have been done have shown that anywhere from two-thirds to 75 percent of the American public supports that. One of the things that interests me when I see the arguments against that — everybody talks about the potential danger to the environment and big oil spills and the like — but if we look at the facts, our industry has been drilling off the coast of Texas, Louisiana, Alabama and Mississippi for decades, and we've not had these environmental catastrophes that people like to paint.

Q: What will the impact of Exxon Mobil's recent $41 billion deal to acquire XTO Energy be on the small and midsize independent oil and gas producers IPAA represents?

A: Consolidation has always been a part of this industry, and I think always will be. It's very much like the food chain. Small companies grow up and get bigger, and larger companies ultimately acquire or merge into them. What is happening there is the majors, years ago, exited North America or at least the Lower 48 in particular, and they totally missed shale gas in America. They've recognized that, and the Exxon acquisition of XTO is a clear signal of that. They want to understand the technology and how they can take that to other places in the world. That's going to be a very important long-term development in terms of natural gas throughout the world.

Q: How about the broader outlook for your industry, particularly regarding natural gas, in 2010?

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A: None of us knows for sure. You have people who are very bearish, and you have some people who are pretty bullish. I'm bearish in the short run but bullish in the long run. I believe we're going to see that turn sometime in the next few months, where you're going to see declines hit in a way that we don't have enough daily production of gas to fill storage up in the summer. That will drive prices a little higher, and you're going to continue to see an increase in activity. But the industry is very good at what they do, and be assured that that activity will create sufficient supply to fill the marketplace over time.